Technical Glitches Not To Hinder Grant Of Tax Refunds: Kerala High Court

While granting tax refund to a petitioner, the Kerala High Court ruled that technical glitches should not stand in the way of ultimate grant of relief by way of refund to taxpayers.

Justice Bechu Kurian Thomas, while observing that such hindrance would affect the confidence of taxpayers to deposit the amount required under Section 129 of the State Goods and Services Tax (SGST) Act, directed the respondent authorities to grant tax refund:

"All the technical glitches that may occur in between, shall not stand in the way of ultimate relief of the grant of refund to the petitioner as otherwise the sanctity of the whole scheme of section 129 of the State Goods and Services Tax Act will lose the confidence of the assessees to deposit the amount as contemplated under section 129 of the State Goods and Services Tax Act, will be affected." 

The Court further observed that considering the fact that the transition phase of the new statutes may cause temporary technical glitches, directed the respondents to grant tax refund to the petitioner:

"Though I find that the conduct of respondents is not appreciable, still taking into consideration the transition phase of the new statute and the temporary glitches that are occurring as well as the fair submission made by the learned Government Pleader that, the amount shall be refunded, I direct the respondents to refund the amount due to the petitioner, within a period of 30 days from the date of receipt of a copy of this judgment." 

Factual Background:

The petition challenged an order issued by the Assistant Commissioner of Excise by which, the petitioner's claim for refund of taxes paid under Central Goods and Services Tax (CGST) as well as SGST was refused on the ground that there was no evidence to prove the payment of tax.

Advocates Harikumar G Nair and Akhil Suresh appearing for the petitioner argued that as per the order of demand of tax and penalty issued under section 129(3) of the SGST Act, the petitioner had remitted an amount of ₹12,26,064 with the State GST Department.

Thereafter, the petitioner challenged this order before the Appellate Authority which found that the petitioner is not liable for payment of any amount of tax and quashed the orders issued by the State GST Department.

By virtue of this order of the Appellate Authority, the petitioner became entitled to refund of the amount deposited under Section 129(3) of the SGST Act, for release of the goods, Suresh submitted.

Therefore, the petitioner filed an application for a refund but the Assistant Commissioner of Excise issued a show-cause notice to the petitioner seeking a response as to why the refund request should not be rejected on the ground of absence of details of remittance of the tax amount, he contended.

While the petitioner submitted a response, the request was rejected which prompted them to approach the Court.

Government Pleader Thushara James, appearing for the respondents, submitted that the reason for rejection is that the amount of tax paid at the first instance was through a temporary account and that since the temporary account is no longer available, the refund cannot be granted through that temporary account.

It was argued that these are all common glitches occurring on account of the transition phase of the CGST Act.

However, the respondent conceded that the petitioner is entitled to a refund of the amount and that the respondents are taking earnest steps to refund the amount without fail in a time-bound manner.

While the Court pulled up the respondent authorities for their actions, it accepted that the transition phase may be accompanied by such technical glitches.

The Court, while clarifying that such glitches cannot be held as a reason for such incidents occurring frequently, quashed the order issued by the Assistant Commissioner of Excise and ordered the authorities to remit the tax refund expeditiously.

Case Title: Dantara Jewellers v. State of Kerala & Ors.